A post dated check is a check on which the issuer has stated a date later than the current date. A post dated check is used in the following situations:
- Deliberate payment delay. The issuer does this in order to delay payment to the recipient, while the recipient may accept it simply because the check represents a firm date on which it will be able to deposit the check. This situation represents a risk to the check recipient, since the passage of time may result in there being no cash left in the issuer’s bank account to be used to pay the amount listed on the check when it is eventually presented to the bank for payment.
- Collection method. The recipient may require the issuer to hand over a set of post dated checks to cover a series of future payments, which the recipient agrees to cash on the specified dates. This approach is used to improve the odds of being paid, especially when the issuer has little credit.
Accounting Treatment
PDC Issued is a CURRENT LIABILITY & PDC received is CURRENT ASSET.
when company issued a Post dated cheque to a Party.
- Party A\C Dr & PDC issued A|C Cr
and on the cheque date
- PDC A/C Dr. & Bank A\C Cr………(same goes to PDC received)
great
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